The end of predictability

We used to be able to use technical charts to predict price movements. No more. Those were the days before central banks began to interfere into markets. Woe to those who think that those formulas still work.

So, why do I produce charts? The charts are still useful as descriptive tools, but not as predictive tools. Poor Larry Edlson. He has been predicting a big drop in gold following by the big rally. It hasn't happened. The FED intervenes every time gold looks to break out. The last intervention was this Friday at 1:15. Between 1:15 and 1:30, ten thousand sell contracts representing 1.5 tons of gold were sold (Look foir the article by Caesar Bryan on KWN). Gold dropped from 1,675 to 1,655.

How is the price controlled? The central bank sells SELL contracts and buys BUY options. The positions nearly cancel out, though BUY options cost more.

The 600 pound gorilla is the national debts of nations. The first graph shows the debt of the US as bigger than all of Europe's put together. Remember thehavoc created by Greece? Well, now Italy, Spain and Portugal are under the crosshairs of rising bond prices. It won't be long before the European Central Bank will have to print money to buy the bonds of these nations. And the FED is still buying Treasuries and is getting ready for QE3.

The second graph shows the price of gold. Note that gold prices are near the 200 DMA, a place where the FED prefers it. A report I read says that the FED will lose control when gold will reach 1,760. The third graph is the XAU, the gold miner index. Gold mining stocks have been decimated and shorted way down. They represent the best value in town.

Finally, we see the predictions of one analyst who predicts that gold is near entering the "hyperbolic" phase of price increases.

What about Larry Edelson? The poor guy was wrong on the big drop in gold prices. He was also wrong in his DOW mforecast of 9,500. Then he gave a buy signal for the DOW, just a day or two before the Stock Market began its current drop.

It has gotten hard to predict things.